S&P 500 Mean Reversion Using IBS and RSI (Classical Mean Reversion Strategy for S&P 500 in 2024 Dynamics)
The classical mean reversion strategy’s performance can be analyzed using various statistical measures, including win rates, drawdowns (periods of losses), and annual returns. These metrics provide insights into the historical performance of the strategy.
We backtest the following trading rules:
IBS (internal bar strength) must be lower than 0.25 (using daily bars).
RSI (21) must be below 45.
If 1 and 2 are fulfilled, go long at the close.
Exit when close is higher than yesterday’s close.
The equity curve since January 2000 looks like the image shown below (starting with 100 000 in equity and allocating 100% of equity to every trade, ie. compounding, but taxes are not deducted)
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/sp-500-mean-reversion-using-ibs-and-rsi/